Community bank trade associations remained neutral on the North American Free Trade Agreement, mostly out of respect for the differing opinions of their members, their spokesmen say.

"We dissected the issue well enough to find that because of the differences of opinion, it would be difficult to reach a consensus," said Ron Ence, director of agricultural finance at the Nafta-neutral Independent Bankers Association of America. "Most people will agree, even those who are opposed to Nafta, that it will be a win-win situation for the financial industry. Those IBAA members who oppose Nafta do so not because it will be bad for banking."

The Savings and Community Bankers of America also refrained from taking a position on the trade agreement.

Effects Mostly Indirect

Experts say that direct impact from the pact will be felt only by banks on the U.S.-Mexico border, while other community banks will be affected by changes in local business.

"The banking industry is an extremely reflective industry -- more so than any other industry," said Robert L. Walters, president of the Bank Advisory Group in Austin, Texas. "When their customers do well and are busy, it will trickle down to the community banks."

However, small banks in a position to take greatest advantage of Nafta might be hesitant about the opportunities Nafta will afford, said Gordon Hanson, assistant professor of economics at the University of Texas at Austin.

"Trade credit is the one opportunity for possible expansion for both big and small banks," he said. "But some people on the border might find it too risky. My prior opinion was that these banks are the best poised to get involved in the north Mexico market -- but they haven't yet."

Mexican Targets

Most of the trade financing for export-import credit has come from big banks. Some smaller Dallas banks may get into the picture once they see a large flow of goods, Mr. Hanson said.

In the meantime, community banks on the border might keep an eye out for Mexican banks interested in acquisition.

"Mexican nationals may look at some of these banks as acquisition targets. This might not have existed if there was no facilitative type of trade agreement," said Mr. Walters. "But even if they do, so what? They will be 20 to 30 at most. Their banks already own banks over here."

Spillover Effect

The spillover effect on banks in areas affected by dislocation in industries like agriculture was largely dismissed by the experts.

"Banks at risk have seen this coming for some time. Most regions are significantly diversified. If their customers sell a lot of garments, or cantaloupes, there will be other industries that will probably do better. The opportunities are there for everyone," Mr. Hanson said.

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